In this article, we will look at the 12 Fastest Declining Economies in the World in 2026. If you want to skip our detailed analysis, you can go directly to the 5 Fastest Declining Economies in the World in 2026.
Economic Growth Forecasts for 2026 Before the War
Major global economies were on a positive trajectory at the start of 2026, driven by technology investment, supportive financial conditions, a booming private sector, and backing for central bank monetary and fiscal policies. According to the IMF’s January 2026 world economic report, titled Global Economy: Steady and Divergent Forces, global growth was projected to remain strong at 3.3% for 2026 and 3.2% in 2027.
At the start of 2026, the major challenge facing the global economies was the tariff and trade tensions. However, this was being offset by surging technology investments, including AI capital expenditure. This trend was particularly more evident in North America and Asia compared to other regions. Moreover, the fiscal and monetary conditions remained supportive, and global headline inflation was expected to decline from 4.1% in 2025 to 3.8% in 2026 and 3.4% in 2027. The IMF in its January report cited “AI bubble burst” as the only major downside to its outlook. The report noted that increased productivity growth expectations due to huge AI capital expenditure were at risk of triggering an abrupt financial correction and could result in a decline in AI investments.
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The Middle East War Threatening Economic Growth Outlook
The optimistic outlook and the projected growth trajectory for 2026 did not last long. On February 28, only two months after the start of 2026, a conflict escalated as the United States and Israel launched a series of coordinated airstrikes on Iran. This was followed by Iran blocking the Strait of Hormuz, through which one-fifth of the world’s oil and liquified natural gas passes, and a series of drone and missile attacks on Israel and several US military bases in the Middle East.
The closure of the Strait of Hormuz sparked an energy crisis around the world as oil prices skyrocketed and have since been swaying up and down with the news. According to Al Jazeera, the prices of Brent Crude were around $70 to $72 per barrel, and WTI Crude were averaging around $65 to $66 per barrel. However, immediately after the war started, the prices surged to exceed the $100 to $119 per barrel price range.
As a result of the worsening geopolitical situation, the IMF in its latest report adjusted its growth outlook. A recent April 2026 report by the organization noted that the global growth is now expected to slow down to 3.1% in 2026 and 3.2% in 2027. Moreover, the global headline inflation, which was earlier projected to drop, is now expected to rise modestly throughout the year. While all the economies of the world are projected to have a difficult 2026, the impacts of increased oil prices and geopolitical tensions are expected to be more pronounced in the developing and emerging economies.
As per the report, the downside to the recent outlook includes risks of prolonged conflict in the Middle East, worsening geopolitical backdrop, and concerns of sell-offs in the technology sector due to a lack of productivity growth from AI. In addition, the public debt remains elevated, and the global financial markets have been uncertain throughout the conflict. On the bright side, recent developments are pointing towards a speedy resolution of this war through negotiations. The IMF expects the decline in economic growth to moderate if the war is resolved quickly and oil prices return to the normal range.
As we mentioned above, developing and emerging nations have been hit most severely by the Middle Eastern war. Let’s take a look at the 12 Fastest Declining Economies in the World in 2026.
Our Methodology
To compile the list of 12 Fastest Declining Economies in the World in 2026, we used the latest IMF Real GDP Growth dataset. From this dataset, we first calculated the 5-year average real GDP growth rate of each country from 2022 to 2026. This is important as it shows long-term country performance over the years. Next, we sorted the list of countries by the Real GDP growth rate of 2026 to see which countries are expected to decline the most in the current year. The list is ranked in descending order of the Real GDP Growth rate of 2026.
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12 Fastest Declining Economies in the World in 2026
12. Yemen
5-Year Average Real GDP Growth Rate: -2.26%
Real GDP Growth Rate 2026: 0.5%
Yemen is situated in the southwestern corner of the Arabian Peninsula. According to the World Bank, Yemen is faced with one of the world’s most severe humanitarian and economic crises. The real GDP per capita of the country has fallen by more than 58% since 2015. As a result, most of the population, around 17 million people, face food insecurity.
The real GDP growth of Yemen was at its lowest in 2023, trailing around negative 9.3%. The country has since improved its economic outlook marginally, and the IMF expects the country to post positive 0.5% real GDP growth in 2026. However, the 5-year average real GDP growth of Yemen still remains at negative 2.26%.
11. Italy
5-Year Average Real GDP Growth Rate: 1.5%
Real GDP Growth Rate 2026: 0.5%
Italy is a European country and is often recognized as the third-largest economy in the European Union. The country is experiencing a period of stunted growth, driven by structural challenges, including those in the manufacturing sector. Moreover, the country is also faced with rising public debt and a declining and aging population.
As per the IMF, as of 2022, the country’s Real GDP was growing at 4.8%. However, the growth has since started to shrink and was recorded at 0.9% in 2023, 0.8% in 2024, and is expected to be at 0.5% in 2026. One of the key reasons behind the cautious growth outlook of Italy in 2026 is the impact of the US-Iran conflict, which has sparked an energy crisis. According to a recent report by Reuters, Italy’s central bank expects the country to enter a recession period in 2027 in the worst-case scenario. It ranks as the 11th Fastest Declining Economies in the World in 2026.
10. Puerto Rico
5-Year Average Real GDP Growth Rate: 1.16%
Real GDP Growth Rate 2026: -0.1%
Puerto Rico is situated in the Caribbean island and is deeply integrated with the US, as it exports roughly 76% of its goods to the US. The country has been recognized as a high-income economy by the World Bank, and its economy thrives on key sectors, including pharmaceuticals, chemicals, finance, and services such as tourism.
As per the IMF data, Puerto Rico’s 5-year average real GDP growth is around 1.16%. The country had a strong growth rate in 2024 of 3.2%. However, the growth has since declined to negative 0.8% in 2025, and is expected to be around negative 0.1% in 2026. The key reasons behind the stunted growth have been high poverty rates, a sharp decline in population, rising energy costs, and increasing public debt. It is ranked as the 10th Fastest Declining Economies of the World in 2026.
9. Liechtenstein
5-Year Average Real GDP Growth Rate: -0.42%
Real GDP Growth Rate 2026: -0.4%
Liechtenstein is recognized as one of the smallest countries in the world and is situated in Europe between Switzerland and Austria. Regardless of its size, the country is recognized as one of the wealthiest in terms of GDP per capita. According to the IMF, the GDP per capita of the country is expected to be around $226,810 in 2026.
The country’s economy is heavily reliant on exports from sectors including manufacturing highly specialized goods such as precision instruments, machine, and tool engineering. It also enjoys high income from tourism and a strong banking and financial system.
Despite all the positive factors, the country’s real GDP growth is expected to be at negative 0.4% in 2026. Liechtenstein relies on an open economy, and geopolitical uncertainties hinder its export-driven economy. Moreover, the country is also facing a tight labor market capacity, which constrains its growth.
8. Bahrain
5-Year Average Real GDP Growth Rate: 3.12%
Real GDP Growth Rate 2026: -0.5%
Bahrain is located in the Middle Eastern region and is a small island nation and archipelago. It consists of about 30 to 33 low‑lying islands, the largest being Bahrain Island. The economy of the country is driven by oil and gas as its key pillars, with an emerging services sector. Despite the diversification effort, around 85% of the government’s revenue comes from oil and gas exports.
Bahrain had already been facing challenges, including low oil production and increasing public debt. This situation has been worsened by the ongoing US-Iran conflict, which has not only led to the closure of key shipping routes but also resulted in attacks on key infrastructure within the country. As a result, the IMF expects real GDP growth for the country to decline by 0.5% in 2026. The average 5-year real GDP growth of Bahrain remains strong at 3.12%. It ranks as the 8th Fastest Declining Economies in the World in 2026.
7. Kuwait
5-Year Average Real GDP Growth Rate: 1.32%
Real GDP Growth Rate 2026: -0.6%
Kuwait is another Middle Eastern country with an oil-driven economy. Although the country has one of the highest incomes per capita, it is mainly reliant on oil and hydrocarbons. Diversification efforts towards financial services, real estate, and construction have been limited.
As the IMF, Kuwait has gone from a real GDP growth of 6.8% in 2022 to a negative 0.6% in 2026. One of the key reasons for this sharp decline in 2026 is the Middle Eastern war, which has resulted in an oil shock globally. The closure of the main shipping route has resulted in exhausted storage capacity, which is causing a decline in oil production.
Moreover, as Iran has been targeting infrastructure in the Middle East, it poses a security threat to Kuwait. This has reduced foreign investor confidence and stalled economic activity.
6. Jamaica
5-Year Average Real GDP Growth Rate: 1.46%
Real GDP Growth Rate 2026: -1.2%
Jamaica is situated in the Caribbean Sea. It is an island country with a mostly upper-middle-class population. The country mainly relies on its service industry, led by tourism, transportation, and financial services. These industries contribute the most to Jamaica’s GDP.
The country has gone from a robust real GDP growth rate of 6.4% in 2022 to a negative 0.1% growth in 2025. The IMF expects the real GDP growth rate to further decline in 2026 to a negative 1.2%.
One of the main reasons behind this decline is the economic impact of Hurricane Melissa, which hit the island in late October 2025. According to the Bank of Jamaica, the natural disaster has caused damage to key productive sectors, resulting in a contraction estimated at -1.0% to -3.0% for fiscal year 2025-2026. It ranks as one of the Fastest Declining Economies in the World in 2026.
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Disclosure: None. This article was originally published at Insider Monkey.
